SEC not keen on regulating lending companies

The Securities and Exchange Commission (SEC) is not too keen on a proposal giving it the authority to regulate lending companies as it intends to concentrate more on the development of the domestic capital market.

An SEC official, who requested not be named, said the commission prefers that the operations of lending investors be placed under the jurisdiction of another government agency to allow it to implement needed reforms to spur the equities market.

The same official said the SEC already has its hands full monitoring the operations of listed companies, pre-need companies, investment houses, mutual funds, brokerage houses, and companies with secondary license from the commission.

The proposal is part of a bill, dubbed as the Lending Company Regulation Act of 2004, filed by Sen. Franklin Drilon. Once approved, the measure will lay down the minimum requirements and standards under which lending investors may be established and do business.

The bill gives the SEC the authority to issue rules and regulations on minimum capitalization, uses of funds received, method of marketing and distribution, maturity of funds received, restrictions or outright prohibition of purchases or sales of receivables with or without recourse basis.

Under the bill, a lending company is defined as a corporation engaged in granting direct loans with interest and charges whether on a secured or unsecured basis, but shall not be deemed to include banking institutions, financing companies, pawnshops, insurance firms, cooperatives and other credit institutions already regulated by law.

The bill provides that a lending company may grant loans in such amounts and interest rates and charges as may be agreed upon between the lending firm and the borrower of debtor provided that the agreement shall be in compliance with the provisions of the Consumer Act of the Philippines.

Lending companies will also be required to maintain books of accounts and records as may be required by the SEC and prescribed by the Bureau of Internal Revenue and other government agencies. In case the lending company engages in other businesses, it shall maintain separate books of accounts for these businesses.

Lending investors service the small and medium-scale needs of customers left unserved by the more sophisticated forms of credit institutions.

Based on records at the SEC, there are over 10,000 lending firms operating in the country.

Drilon said the upsurge of lending investors is expected to continue unabated as evidenced by the continuous registration of new ones with the Bangko Sentral ng Pilipinas and some non-bank financial institutions converting into lending investors.

This, he said, could be partly attributed to the relatively free and unregulated operational atmosphere that gives lending investors a distinct privilege over the regulated NBFIs.

Common complaints on lending investors cover high lending rates, non-disclosure of all charges on loans and non-issuance of official receipts.